Portfolio

Stock Strategy: Suzlon Energy likely to move in narrow range

Updated on: Jul 02, 2011
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Suzlon Energy is likely to move in the narrow range of Rs 43.5-57.5 in the immediate term. It finds an immediate resistance at Rs 52 and support at Rs 47.

Suzlon: The immediate outlook for Suzlon Energy is neutral. The stock is likely to move in the narrow range of Rs 43.5-57.5 in the immediate term. It finds an immediate resistance at Rs 52 and support at Rs 47.

The long-term outlook still remains negative for the stock. The outlook would change to positive only if Suzlon closes above Rs 98.

F&O pointers: Despite sharp gains on Friday, the stock saw only a small accumulation in open interest. Option trading indicates a narrow range as both calls and puts witnessed accumulation of open interest.

However, calls saw higher accumulation indicating a positive bias.

Strategy: Traders can consider short strangle. Short strangle is a neutral strategy that involves the simultaneous selling of a slightly out-of-the-money put and a slightly out-of the-money call of the same underlying stock and expiration date. This can be initiated by selling 52.5-call and 45 put.

The maximum profit in this strategy is limited to the premium collected while the loss could be unlimited if the stock move significantly in a single direction.

The strategy, therefore, is best suited for high-risk appetite traders only.

Besides selling (writing) options requires higher margin commitments.

Market lot for Suzlon is 8,000. The strategy is for a slightly longer period. Traders could even consider holding it till expiry.

Reliance Communications: The immediate outlook turned positive for Reliance Communications. It now finds a support at Rs 86 and resistance at Rs 107. It appears the stock is likely to touch its immediate resistance level.

A close above the resistance could lift the stock towards Rs 122. However, the long-term outlook still remains negative for the stock. A close below Rs 82 could trigger a decline on the stock.

F&O pointers: The RCom futures added fresh long positions on Friday. However, option trading indicates a neutral view, as both calls and puts witnessed accumulation of open interest.

Strategy: Traders can consider buying RCom futures with a stop-loss at Rs 92.

Traders could also consider buying RCom 100 call option that closed at Rs 4.1 on Friday.

Traders with an appetite for higher risk can consider selling 100 put that closed at Rs 6. Market lot for RCom is 2000.

Feedback may be sent to >f&o@thehindu.co.in, >blfuturesoptions@gmail.com .

Published on July 02, 2011

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